Tax planning for re-development made by co-owner of property
Sr. No. Points Solution / Remarks
Facts of the case
1 In a building there are three Joint landlord (co-owner) having eight tenants
2 Out of three owner of building – two are also tenant in the same building
3 All the tenants agreed for certain conditions for redevelopment.
So landlords want to redevelop the Building consisting of 15 flats, out of which 7 are saleable and balance 8 will be given to the tenants.
4 IOD received in the name of Devraj & others ( Devraj in one of the three landlord)
4 Purchased cost of building is Rs. 12L
5 At present market value of building is 100L
6 Tenant will get exemption U/S. 54F for receiving new flat against surrendering tenant-ship rights.
1.a Now which situation is better for tax saving (LTCG, GST & normal income tax on business of development)
1.b What would be the implication for redevelopment project for following options:-
i) Open a Partnership firm and transfer land rights by landlord to firm and develop building under firm.
a) JDA has to be prepared & Stamp duty cost @ 6% on market value of Land + GST @ 12% / 5% on JDA
b) Also, which sub option would be better for JDA:-
a. Revenue Sharing
b. Area Sharing
ii) If, Self-development by land lords
We can save Stamp duty +GST (on JDA as mentioned in pt. (i)).
However, in current scenario there are three landlords, then how to get GST registration? Since, GST is PAN base and also how to distribute cost of project? (Also note 80% cost are from GST registered dealer)
Since we can get RERA registration by clause of co-owner, so there won’t be any issue for RERA.
iii) What would be the scenario if development done by AOP /BOI status?
a. Also what points to be taken care for, for preparing AOP/BOI Agreement within co – landlords, for such situation?
b. L/B property has to transfer to AOP or not ?
c. Also check while transferring property (if needed as per law) __ Stamp duty + GST applicable or not?
iv) If Self developed and claim by all three as LTCG of full consideration received by sale of flat:-
• When flat sale under construction and payment received as per slab of work , time of capital gain tax payment.
• Can we put clause for tax working after OC received?
• Of three land lord _2 opt option for LTCG tax as investor but one convert his share of land to stock in work tax = LTCG+ business any issue on same?
• What care should take on RERA
• Three individual GST number will obtain
• Also open one common joint a/c for common expenses
• Project is one , so any mutual agreement required for sharing of Area in new building
v) Or any other best issue for tax planning considering LTCG, Income tax, GST & RERA?
Note : Answer the above issue with supporting case law available